A new era for New York City's outdated pay phones will begin to take shape in October, when the current 15-year-old franchise expires, making way for a new franchisee. But while government officials envision sleek, solar-powered Wi-Fi hubs replacing mangy, graffiti-ridden kiosks, change may take a while, judging from the hornet's nest the city has stirred up.

At issue is the decision to award the installation and operation of 10,000 "public communications structures" to a single winning bidder. That's a sharp divergence from the current arrangement in which 10 companies hold contracts to manage what's left of the city's pay-phone infrastructure, which has dwindled to around 9,000 phones from 35,000 more than a dozen years ago.

The city, which laid out the plan in a request for proposals in May, believes a single winner will yield a unified pay-phone network with 21st-century booths designed to supply free Wi-Fi and, possibly, cellphone charging across the five boroughs.

The RFP has certainly attracted interest: Representatives from Google, IBM, Samsung and Cisco were among the crowd in attendance at an information session in May. Responses are due July 21.

The city's winner-take-all approach has Telebeam Telecommunications, one of the top three current franchise holders, fighting for its livelihood. The Long Island City, Queens-based company has spent $25 million to modernize its network of more than 1,300 phones. Not winning the contract would mean losing most of its revenue.

"There is nothing that one provider can do that three or four qualified companies can't," founder and Chief Executive Ray Mastroianni said in an interview. "When you have a monopoly, you have no innovation."

Though pay-phone calls generate a relative pittance in the age of the smartphone, the kiosks are valuable advertising real estate. Experts say they could become up to four times more valuable with digital panels, which show multiple ads.

For the just-ended fiscal 2014, gross revenue for the pay-phone franchises came to around $47 million, with all but a few million coming from advertising. The city collected $16.4 million in fees.

Attorneys who have worked with the franchisees insist the city is on shaky legal ground. They argue that the Telecommunications Act of 1996, which targeted telephone monopolies, made it illegal for any statute to block a company from providing telecommunications services, pay phones included.

The city's single-franchisee approach could spur a barrage of lawsuits by the losing parties.

"Since Congress passed the 1996 Act, there have been only a handful of cases in which state or local governments attempted to justify legal requirements, like franchises, that would create or maintain a monopoly," telecommunications lawyer Robert Scott, who has represented Telebeam and others, testified at a City Council oversight committee hearing in June. "They have all been found to violate [the law]."

The Department of Information Technology & Telecommunications, the city agency that administers the franchise, has heard these arguments before. It says the courts have upheld a provision in the act that gives local governments authority over telecommunications services on public property.

Expanding Wi-Fi

DoITT has also argued that there is nothing new in having a single franchisee. The city has taken that approach with street furniture contracts, among others.

It's also possible that multiple vendors could get in on the action. The RFP actually encourages bidders to enlist partners with different areas of expertise. DoITT has also made the franchise nonexclusive, meaning that it could issue a new RFP as the Wi-Fi network expands beyond the initial 10,000 sites.

In testimony read before the oversight committee, DoITT Assistant Commissioner Stanley Shor cited some of the hoped-for benefits of having one franchisee: a single Wi-Fi system for users, consistent design, less sidewalk clutter (the RFP limits how close kiosks can be to each other) and "network scale." In other words, a single entity will control all of the most valuable ad inventory, such as in core business districts like midtown. That ad revenue will help pay for a five-borough free Wi-Fi network.

Telebeam's Mr. Mastroianni said the Cemusa street furniture deal did not work out well, but aside from the support of some City Council members, including zoning and franchises subcommittee chair Mark Weprin, he has been making his arguments alone. Fellow franchisee Titan, which controls more than half of all phone kiosks, objected to the single-franchisee approach in two letters to DoITT a year ago. But the company has since moved on.

"We understand and respect the city's process and are looking forward to responding within the parameters of the RFP," Scott Goldsmith, Titan's chief commercial officer, wrote in an email to Crain's.

Van Wagner, a top-three franchisee, voiced reservations about the legal underpinnings of the single-franchise approach in a request for information two years ago. The company, however, declined to comment for this article.

Still, those with an interest in the current franchise, might end up suing once the contract is awarded.

"It will be an exciting, though avoidable, legal fight," said Manhattan telecommunications lawyer Robert Brill, who has represented Telebeam and other franchise holders over the years. He expects to put his expertise to use. "I'm sure I won't be alone."